Foreign trade payment rises to $267.96m – CBN

Foreign trade payment rises to $267.96m – CBN

Nigeria’s use of Letters of Credit (LCs) for foreign trade rose modestly by 3.68% year-on-year to $267.96 million in the first four months of 2025, compared to $258.46 million in the same period in 2024, according to the Central Bank of Nigeria (CBN). LCs, which are bank guarantees ensuring payment to exporters upon confirmation of shipment and documentation, are vital instruments in international trade, particularly for importing visible goods.

While the total value increased slightly over the year, monthly figures showed significant volatility. January 2025 saw a small rise from the previous year, but February—though the highest in volume—dropped compared to February 2024. March experienced a steep decline, followed by a rebound in April. The fluctuations suggest an unstable trade environment, influenced by various economic factors.

Analysts interpret the overall rise as a sign of improving confidence in Nigeria’s external sector, possibly due to better foreign reserve levels and a slight easing of forex constraints. Previously, limited access to foreign currency forced many importers to prepay for goods, making LCs difficult to obtain.

However, challenges remain. Access to foreign exchange is still restricted for many businesses, and Nigeria’s heavy external debt servicing—totaling $2.01 billion from January to April 2025—places continued pressure on the nation’s reserves. This figure represents a 50% increase in debt-related outflows year-on-year and now accounts for over 75% of total foreign currency outflows.

Experts caution that while increased LC activity suggests some recovery in trade finance, the sustainability of this trend is threatened by persistent forex shortages, mounting external debt, and weak revenue streams. The data paints a mixed picture of cautious recovery amid underlying financial strains.